Australians are increasingly looking beyond term deposits, let alone a savings account, for their savings needs.
The latest statistics from Roy Morgan's Consumer Single Source Survey show that term deposit customer numbers have fallen by two percent over the last year. This is largely due to the low interest rates which currently characterise Australia's financial markets.
Term deposits have traditionally been attractive for investors, allowing them to save more than through a simple savings account by depositing cash for a fixed period of time, and reaping the benefits of interest when they are allowed to withdraw it back. The ongoing low interest rates and official cash rate, however, have pushed investors elsewhere.
"The decline in term deposit rates over the last two years has encouraged customers and banks to look at other products that can offer a better return as well as other benefits including flexibility, access etc.," Industry Communications Director at Roy Morgan Research, Norman Morris, said.
High interest online accounts the most popular
When looking for a high interest savings account, more and more Australians are choosing high interest online accounts, Roy Morgan revealed.
High interest online accounts saw solid growth at nearly all of the big four banks. Such accounts saw an increase of 102,000 owners over the previous year, putting the total number of high interest online account-holders in Australia at 5.88 million. This makes them the most popular type of savings account.
Bonus interest/reward saver accounts see a surge
Bonus interest accounts, also known as reward saver accounts, were the big winners of the trend. This type of account experienced a massive increase of 709,000 in customer numbers since last year to a total of 4.55 million in March 2014.
These accounts offer an extra interest rate on top of the existing base interest rate, which can go a long way to help you save money. However, these accounts will typically add strict conditions onto being able to profit from this bonus interest rate, such as not making withdrawals or having to deposit a select amount in a fixed period.
This makes bonus interest accounts attractive in a low interest scenario, but may not benefit everyone. Such accounts would not work as well for those who like to have flexibility with their savings accounts.
Mortgage offset accounts also grow
Mortgage offset accounts saw the second highest increase in the preceding year, growing by 181,000 to 1.43 million.
Also called home loan offset accounts, such accounts link a transaction account to a home loan which can be used as a regular savings account. Any money credited to this account will be offset against the value of the mortgage, meaning that when the mortgage accumulates interest, it won't be on the full total.
This can make the mortgage offset account an attractive savings option for those wanting to take pressure off their home loan repayments while saving a bit of money.